ANZ Research discusses AUD outlook and expects another phase of AUD weakness for a move through 0.69 into year-end, before a trough at 0.67 in Q1 of 2019.
"The weakness will be driven by a deterioration in global risk appetite, rather than any substantial change in the outlook for Australia interest rates or commodity prices. We view this as the final phase of weakness for the AUD. The push below USD0.70 will present medium term value opportunities to average into the pair," ANZ argues.
"This forecast leaves more strategic hedgers in a difficult space. The likelihood of further downside is high, but the outright target (short of forecasting a large, destabilising market event) is relatively close. As such, we think this is a good time to start averaging into medium term hedge positions and using optionality. We like the 6 month seagull, buying a 0.6950/0.6740 put spread, and selling a 0.7450 call, costing AUD1,810 in premium, with a target of AUD38,965, should AUD trade down to USD0.67. This can also be expressed as 12 month seagull, buying a 0.6950/0.67 put spread, and selling at 0.7650 call, at zero cost," ANZ recommends.